A few years after India became independent in 1947, a time when the English language was often considered colonial baggage, Purushottama Lal opened a publishing house to promote Indian-English writing. P Lal, as he was known, was then a young and popular teacher of English literature, and firmly believed that "English is an Indian language as well".

Lal, who has died aged 81, co-founded Writers Workshop in order to provide a publishing venue for himself as well as his talented student writers. Since it began in 1958, Writers Workshop has become the epicentre of a literary movement and a community of writers and readers. The list of authors that the company took a chance on when they were little known includes Vikram Seth, Kamala Das, Agha Shahid Ali and Nissim Ezekiel.

Decades before the current publishing boom in India, and the rise of Indian writing in English as a literary force, Lal pioneered a model for alternative publishing. The printing took place in a neighbour's garage, the selling from a storefront attached to Lal's home. The books were hand-stitched, hand-pasted and hand-bound with hand-loomed sari cloth. They also boasted fine calligraphy; Lal had a keen sense of the book as art.

Authors were encouraged to buy 100 copies of their books, a step which has now become mandatory for everyone published by Writers Workshop. Moving from its early emphasis on poetry – at the beginning, Lal stated "It is obnoxious to plead, as publishers do, 'I will not publish poetry because it does not sell'" – Writers Workshop now publishes a range of fiction, literary criticism and screenplays.

The raison d'etre of Writers Workshop was its accessibility. Young writers were invited to meet Lal in his book-lined study where he offered gentle advice. He had three criteria for accepting work for publication, none of them pragmatic or profit-oriented. "One: a writer sends in material that's so impossibly good that it's 10 years ahead of its time – and there are very few commercial publishers who would think of investing in such first-rate postdated creativity. Two: the work shows promise, and the writer might stop writing altogether if not discreetly encouraged through publishing. Three: the manuscript appeals to my taste, such as it is, and I enjoy bringing out stuff that I like; it's like introducing a talented friend to strangers, though some may well wonder where the talent lies."

Lal was born in Kapurthala, Punjab, and arrived in Calcutta (now Kolkata) as a young child. Educated at St Xavier's College, Calcutta, he started teaching there after he graduated in 1953. By the time he retired, after around four decades of teaching, Lal had become a legendary teacher, remembered by his students for lectures that went beyond the syllabus and his willingness to nurture young student writers. Lal continued his academic career as an honorary professor at St Xavier's and as a visiting professor at several universities abroad.

Lal had a respectable reputation as a neo-romantic poet. However, his greater contribution to literature is his transcreation of the great Indian epic, Mahabharata, into English. "Transcreation" was a concept beloved to him, and which he distinguished from translation. In the preface to The Mahabharata, he wrote: "No epic, no work of art is sacred by itself; if it does not have meaning for me now, it is nothing, it is dead."

The task he set himself was to render the epic into contemporary literature using simple, straightforward English rather than preserve it in its archaic form for the sake of preservation. Line by line, he set out to render the Mahabharata into 18 volumes. True to the oral tradition through which the epic has passed from generation to generation, Lal started a reading series in 1999 for the transcreated epic at a local library in Kolkata.

"I am at Shanti Parva [The Book of Peace]," Lal said last year. "Only Anushashana Parva [The Book of the Instructions] is left. I think I can finish it before I die." In Shanti Parva, Yudhishthira has been crowned as the king after an epic battle; his great-uncle, the ascetic and warrior Bhishma, is instructing him on statecraft before he dies. Lal's transcreation of Anushashana Parva, which details Bhishma's final instructions, remains sadly incomplete.

Lal is survived by wife, Shyamasree, whom he married in 1955, his son, Ananda, and his daughter, Srimati.

• Purushottama Lal, publisher and writer, born 28 August 1929; died 3 November 2010